The Blockchain Theory

Ethereum, Blockchain and Bitcoins

Part 1: The Blockchain Theory

I finally got some time to really wrap my head around Ethereum, Blockchain and Bitcoins. Since my start at zauberware I have been tagged as the 'Blockchain Evangelist' and it's finally time to live up to that title. After reading tons of blog articles, a few scientific papers, two books and some tutorials, I can say that the task about writing a blog article only got harder. Where is the best point to start? How can I write something new without repeating just one of the many articles I read? What does my article want to be?

BlockchainLisa Schmitz –
19 September 2017

Dieser Artikel ist leider nur auf Englisch verfügbar.

My team suggested a reference guide which already feels like a good direction. So I decided that this article could be similar to a related work section, a literature research that paints a picture of the current state of available texts about the blockchain technology.

In part one, the one you are reading right now, I will start with showing gentle introductions that get you started with the technology's fundamentals. In the second part I will cover the practical aspect of the Ethereum blockchain and suggest some tutorials. This way I will build a bridge to the third and last part presents interesting applications (I just picked a few I liked) and ends with possible application areas for the blockchain apart from cryptocurrency and wallets. Because eventually, it's not all about the money.

Getting started with decentralized applications

Blockchain, bitcoin and Ethereum are maybe terms that you have heard about already or maybe it's just all still a mystery to you. Before I let you loose on the introductory blog articles, I want to add some clarity concerning the terms. It helps to keep the following in mind: blockchain is the technology, the bitcoin system and Ethereum are implementations of the blockchain and act as a trading platform for their respective cryptocurrency.

But creating a cryptocurrency is just one of the many potential application areas. Bitcoin and ether are both examples for such a currency while bitcoin is only recorded, stored and traded over the bitcoin blockchain and ether is flowing back and forth through the Ethereum blockchain. Before anyone starts to nitpick on this definition, I'm going ahead and potentially add some confusion by saying that there is not this one bitcoin system or the one Ethereum blockchain.

If you run the code of the bitcoin blockchain on your computer then you have your own blockchain running with a currency that is you also call bitcoin and you can give yourself all the amount of bitcoins you desire. But if nobody joins your blockchain and nobody wants to trade something in exchange for your bitcoins then your bitcoin currency is not worth anything [1]. Alternative currencies like this exists and they are generally known as Altcoins [1]. To get a feeling for the differences between Bitcoin, Blockchain and Ethereum, I suggest reading this series of articles here:

By now you should have come across a vast amount of new terms like ledger and gas and smart contract. That was a lot to take in at the beginning and I think that this article helps to sum everything up and really get those terms into your head:

The second part of that article turns into a tutorial but has also a good overview of the tools that you need for developing. But for now its okay to focus on the explanatory first part.

The Bitcoin Blockchain

I tried to keep the introduction articles balanced but you might have noticed that especially the last article focuses on Ethereum. The reason for that in contrast to the Ethereum blockchain, the bitcoin system does not have smart contracts. The smart contracts are the feature that make Ethereum so attractive to developers and create a room for building new amazing application on top of the system. However, learning about the original bitcoin system helps to understand the blockchain in general. The Satoshi paper is indeed mostly about the technology behind bitcoin and definitely a recommended read: Nakamoto, Satoshi. "Bitcoin: A peer-to-peer electronic cash system." (2008).

As a scientific paper it is written on point and you might want to dive deeper into the material. One book that absolutely fulfills this purpose is "Bitcoin, Blockchain und Kryptoassets: Eine umfassende Einführung"by Fabian Schär and Aleksander Berentsen (unfortunately only available in German at the time). It is a great read, not only does it explain the economical context but it also goes into detail about the cryptography mechanisms that are fundamental to the blockchain. It is hard to find anything missing in this book, it deals with the technology and history of the bitcoin system in a scientific manner without being dry. I can recommend this book to anyone interested in the topic who wants to gain a thorough understanding of the system.

What's next?

Now that you have gained an understanding of the system it is time to look at the options how to get you started with developing DApps - Decentralized applications. Therefore I will provide you with some useful tutorials and background in the second part of this blockchain series.